Economic crisis in Nigeria free essay sample

The evolution of Nigeria was from about 1849 until it attained independence in 1960. During this period a lot of events occurred, and is largely the story of the great impact of the British on the Nigerian people. The colonial authorities (British) sought to define, protect and realize their imperial interest in the portion of West Africa because of its endowment with natural resources, apparently this occurred about hundred years ago. The British was very determined to pursue their goals which were largely economic and quite strategic. The British was involved deeply with the economic life of their colonized people. In this period the British found a huge amount of crude oil in the coastal regions, and the Greyne Goldie’s National African Company (1888) which had successfully squeezed out rivals but was later changed to the Royal Niger Company, chartered and limited. The name Nigeria sprang up in 1914, which was the amalgamation of the northern and southern protectorates by the then colonial secretary Flora Shore. We will write a custom essay sample on Economic crisis in Nigeria or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page As time swept past, constitutions were made such as the Sir Hugh Clifford constitution of 1922, the Richards constitution of 1946, the MacPherson constitution was promulgated in 1951 and so on. From this point, the Nigerian state moved on until its independence in 1960. Now with concentration on the economy of Nigeria, it has been petroleum-based, the economy has suffered some lapses such instability, corruption, and poor macro-economic management, the economy has however strongly proven that despite all odds it is a promising one and may develop the largest economy in Africa competing with South Africa. HISTORY OF NIGERIA’S ECONOMY. (history)This a brief evaluation of Nigeria’s economy the pro-oil boom (1960-1970), the period of oil boom (1971-1977), the period of structural modification and stabilization, and the period of guided deregulation. The Nigerian economy has had an abridged history. In the period 1960-70, the Gross Domestic Product (GDP) recorded 3. 1 per cent growth yearly. During the oil boom era, roughly 1970-78, QDP grew positively by 6. 2 per cent yearly an impressive growth. However, in the 1980s, GDP had damaging growth rates. In the period 1988-1997 which constitutes the period of structural adjustment and economic liberalization, the QDP responded to economic amendment policies and grew at a positive rate of 4. 0. In the years after independence, industry and manufacturing zones had positive growth rates except for the period 1980-1988 where industry and manufacturing grew negatively by 3. 2 per cent and 2. 9 per cent respectively. In the early 1960s, the agricultural sector suffered from low commodity prices while the oil boom contributed to the negative growth of agriculture in the 1970s. The boom in the oil sector lured labor away from the rural sector to urban centers. The impact of agriculture to GDP, which was 63 percent in 1960, deteriorated to 34 per cent in 1988, not because the industrial sector increased its share but due to neglect of the agricultural sector. It was therefore not surprising that by 1975, the economy had become a net importer of basic food items. The apparent increase in industry and manufacturing from 1978 to 1988, was due to activities in the mining sub-sector, especially petroleum. Capital formation in the economy has not been satisfactory. Gross domestic investment as a percentage of GDP, which was 16. 3 per cent and 22. 8 per cent in the periods 1965-73 and 1973-80 respectively, decreased to almost 14 per cent in 1980-88 and increased to 18. 2 per cent in 1991 -98. Gross National Saving has been low and consists mostly of public savings especially during the period 1973-80. The current account balances before official transfers are negative for 1965-73, 1980-88 and 1991-98. Unemployment rates averaged almost 5 per cent for the period 1976-1998. However, the statistics especially on unemployment, must be interpreted with caution. Most job seekers do not use the labor exchanges, apart from the inherent distortions in the countrys labor market. Based on some basic indicators, it appears that the economy performed well during the years immediately after independence and into the oil boom years. However, in the 1980s the economy was in a recession. The on-going economic reform programmer is an attempt to put the economy on a recovery path with minimal inflation. The analysis that follows tries to discuss the developments in the economy for different periods. YearsPercent 1960-703. 1 1965-7816. 3 1970-786. 2 1973-8016. 3 1980-886. 1 1988-974 Figure 1 history of Nigeria’s economy This graph explains the above History. CURRENT STATE OF NIGERIA’S ECONOMY (142)Failure of the military to diversify the economy, Nigeria’s economy has overdependence on the capital-intensive oil sector, which in real sense actually provides less than 25% of the GDP despite providing 95% of foreign exchange earnings, and also about 65% of government revenues. Although it’s a large exporter of raw food produce and also a larger importer of it’s already processed food and therefore the agricultural sector has not been able to keep up with its rapidly growing population. Because of the crushing poverty, the Nigerian economy is struggling to leverage the country’s vast wealth in fossil fuels. The term â€Å"resource curse† is tagged on countries that although has vast wealth is still struggling with extreme personal poverty, such as Nigeria. Reportedly, 80 percent of the revenue flows to the government, another 16 percent cover operational cost whilst the 4 percent left goes to the investors but the World Bank has proven this wrong as 80 percent is for the government and 1 percent for its population. TRENDS OF NIGERIAN ECONOMY. (trends)According to the trading economy of Nigeria it gives a brief review of the recent trends in Nigeria, the Gross Domestic Product (GDP) in Nigeria elongated 7. 67 percent in the fourth quarter of 2013 over the same quarter of the previous year. GDP Growth Rate in Nigeria is reported by the Central Bank of Nigeria. From 2005 until 2013, Nigeria GDP Growth Rate be an average of 6. 8 Percent reaching an all-time high of 8. 6 Percent in December of 2010 and a record low of 4. 5 Percent in March of 2009. Nigeria is one of the most technologically advanced countries in Africa. Agriculture is the largest sector of the economy, accounting for about 42 percent of total GDP. Yet, the fastest growing segments are Wholesale and Retail Trade and Telecommunication and Post. Together they account for almost 35 percent of total output. The third most important sector is Crude Petroleum and Natural Gas which institutes 13. 5 percent of total weight, but its influence to GDP have been diminishing over the last two years. Industry and Construction account for the remaining 9. 5 percent of the GDP. This page provides Nigeria GDP Growth Rate actual values, chronological data, forecast, chart, statistics, economic calendar and news. The economy trend of Nigeria also drew some attention to its agricultural sector and also according to intercontinental food policy research institute it has stated the following Agriculture is the economic mainstay of the majority of households in Nigeria (Udoh, 2000) and is a significant sector in Nigeria’s economy (Amaza, 2000). (tradingeconomics. com) FUTURE OF NIGERIAN ECONOMY. (google)Nigerian economy has a bright end ahead of them as the already have the aim of becoming Africa’s largest economy after the leading country South Africa. The future of the Nigerian economy has been visualized by the nation’s encyclopedia Nigerias prospects for sustainable economic growth are mixed. Despite current hardships, Nigeria represents an essential market in Africa with its vast human and natural resources. Its revenues from both the recent and ongoing reclamation in oil prices and the export of liquefied natural gas should help to rebuild the nations traumatized socio-economic infrastructure. The anti-corruption legislation, rigorously enforced, should help to reestablish transparency and responsibility into economic decisions, which would boost national and international investor confidence in the nation. Nigeria has many impediments on its road to sustainable development. Earnings from non-oil exports are unlikely to improve significantly because of the high cost of production. Acrimony between the administrative and legislative arms of the government continue relentlessly to the detriment of collective and decisive action. Throbbing and costly fuel shortages, caused by the inability of Nigerias dilapidated refineries to produce anywhere near capacity, restrain the nation. Inter-ethnic and religious conflicts continue to take their tolls in human lives and physical assets of the nation. Unemployment, especially among college graduates, has reached excruciating levels. Armed robbery and crime constitute a present hazard to the economy. These impairments must be more determinedly addressed to enhance Nigerias chances for growth and development. CONCULSION Scott Rogers, IMF Mission Chief for Nigeria, issued today in Abuja the following statement: â€Å"The Nigerian economy weathered the global economic recession and domestic banking crisis remarkably well. Real Gross Domestic Product growth this year is expected to be exceptionally high on the back of a strong recovery in oil production and continued strong growth in other sectors. However, inflation remains stubbornly high and international reserves continue to fall as the authorities support the exchange rate. â€Å"â€Å"It recommends that expenditures be reallocated from recurrent to capital projects to support economic growth. The medium-term fiscal policy for all levels of government should be anchored by a strong oil-price rule which would align government spending with available resources. â€Å"The team recommended that the CBN conduct monetary policy with a view to reducing inflation to a single-digit level. In this regard, the team supported the recent increase in the monetary policy rate, but noted that the CBN needs to make better use of open market operations to make its policy rate effective. The team understood the concern about the stagnation of aggregate credit to the private sector. Slower growth in credit is not unexpected in the aftermath of the unsustainable credit growth driven by equity-related lending. Efforts to boost lending to small businesses should be promoted through targeted reforms, such as an effective credit risk bureau, better collateral execution and bankruptcy procedures, and improved land tenure system. â€Å"Key target in the Vision 20:2020 strategy is to transform Nigeria into a one of the world’s top 20 economies by the year 2020. However, achieving the high level of public investment outlined in the strategy will require a major shift in public resources from recurrent to capital spending, substantial increase non-oil revenue, and substantial expansion in budget implementation capacity. It will be very important, therefore, that the public capital projects be clearly prioritized in the event that fiscal resources are inadequate to fully implement the Vision. †